If you invest in bonds, it is important to learn how to read a bond chart. A chart, also commonly referred to as a table of bonds, is a way for investors to gauge the risk of buying a bond from a specific issuer, country, or state. To read a tax free bond ratings chart you will need to familiarize yourself with the most common terms related to investing. Below is an explanation of each term used on a chart and a brief explanation on how to gauge risk based on the information displayed on the chart.
Terms You Will Find on a Chart
Column 1 – Issuer
The Issuer is defined as the company, state, province, or country that issued the bond. The issuer may appear as initials or it may be spelled out in its entirety.
Column 2 – Coupon
The coupon is a term that refers to the interest rate that the issuer will pay the lender. This interest rate is fixed.
Column 3 – Maturity Date
The maturity date is the date when the issuer will repay the investor. Most charts will display the last digits of the year that repayment is quoted.
Column 4 – Bid Price
This can also be classified as the bond rating. This is the amount an investor is willing to pay for the item in question. For example, if a bond has a price of 80, the bonds from the issuer are trading at 80 percent of its face value.
Column 5 – Yield
Yield indicates the yield to maturity, which is the annual return.
Reading a Rating Chart
Rating charts rate the performance of specific bonds. The most secure bonds will have an A rating, whereas junk bonds will have a C. Bonds will a lower yield and or a lower bid price is less desirable. Compare the bid price, rating, and yield of each bond to make an accurate comparison.
When you are gauging your risk, you should do your research on financial websites. Rating charts can be a valuable tool if they are read correctly. Look for general information on charts and a reliable rating company. MyBondGuy only lists the highest quality bonds on its website.
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